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Inherited debt and what to do with it?

Unfortunately, there are also a lot of problems associated with dealing with an estate. What if you inherit a debt? Is it possible to defend yourself? And what if, for example, two-year-old children inherit such a debt?

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Inheritance is regarded as a right to the estate – that is, to the “totality of the estate” of the testator, which may include both property and debts. Only from the estate as a whole are individual heirs awarded shares – shares in the estate. The only things that do not form part of the estate are, for example, rights and obligations that are so strongly linked to the person of the testator that it is not possible for them to pass to someone else.

The problem, of course, is that because the estate is taken as a whole, it is possible that the debts will be as high as the value of the estate or exceed it. The debts of the testator then pass to the heirs (although the law may provide for exceptions, but these are only the bare minimum).

If such a situation should arise, there are three ways to avoid the estate (or part of it) becoming burdened with debts passing to the heirs:

  1. 1. to renounce the right of succession before the death of the testator; in this case, the heir and the testator must draw up a contract renouncing the right of succession
  2. 2. to refuse the succession – if the testator is already deceased
  3. 3. to renounce the succession before the court in the succession proceedings in favour of another heir – but the other heir must also agree to this

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Therefore, refusal of inheritance is the easiest and surest way to avoid the situation described above. Also, none of the above mentioned methods makes it possible to obtain only property through the succession and to avoid debts; thus the heir, for example, renounces the estate as a whole by refusing it.

The heir may also propose that the estate be inventoried – that is to say, that the value of the property be determined and the debts forming part of the estate be taken into account; the court will then order the inventory.

It is also possible to propose that the court publicly invite creditors to declare their claims against the deceased – i.e. to come forward and state that the deceased owed them debts which are then included in the estate. This may limit the cases where the debts exceed the assets in the estate – even if all the assets are to be used only to pay the debts, if this procedure is used, only those creditors who apply within a certain time limit will have the right to settle the debt. Thus, it is possible for an heir to get “to zero” but not “to the negative.”

However, there are also exceptions to this possibility, so it will not be 100% effective (e.g., if the creditor has a lien or other similar right on some item that belongs to the estate).

Children get into the situation with inherited debts because they may be heirs, but usually their legal representatives act for them – i.e. it may happen that the legal representative does not refuse the inheritance, although this might be appropriate in the case of a heavily indebted estate, the court confirms the inheritance and then problems arise.

Are you still unsure about your inheritance? Let us know and we will advise you.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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